Barco N.V. Cinema Drives Top-Line Beat; Healthcare and Enterprise Behind EBITDA Expansion

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1 EQUITY RESEARCH COMPANY UPDATE February 10, 2017 Stock Rating: PERFORM mo. Price Target NA BAR.BR - BRU Yr. EPS Gr. Rate 3% 52-Wk Range Shares Outstanding 12.5M Float 8.6M Market Capitalization 1,050.5M Avg. Daily Trading Volume 11,793 Dividend/Div Yield 1.75/2.17% Book Value Fiscal Year Ends Dec 2017E ROE 9.0 % LT Debt 66.8M Preferred $0.0M Common Equity 590M Convertible Available No Revenue ($/mil) 1H 2H Year Mult. 2015A B NM 2016A B NM Prior (E) B NM 2017E B NM Prior (E) B NM 2018E B NM Barco reports semiannually. Revenues in euros. EBITDA 1H 2H Year Mult. 2015A NM 2016A NM Prior (E) NM 2017E NM Prior (E) NM 2018E NM TECHNOLOGY/EMERGING TECHNOLOGIES AND SERVICES Cinema Drives Top-Line Beat; Healthcare and Enterprise Behind EBITDA Expansion SUMMARY As a Euronext-traded name, Barco reported FY2016 earnings early this morning with revenue and EBITDA ahead of our estimates on an absolute basis, but margins below our expectations. While growth initiatives remain unchanged (investing in Escape content, growing Clickshare rapidly, healthcare presence in emerging markets of China and India), Barco announced further measures to improve operational efficiency: scaling back patient care in Healthcare, and considering strategic options for the non-core lighting activity in Entertainment. We believe Barco may be on the verge of an inflection point from its transformational past few years. The company continues to focus on core competencies and now we are seeing positive results. We await a more attractive entry point and continued execution. Maintain Perform. KEY POINTS Results: Total 2H16 revenues grew 9.7% y/y. Entertainment grew 22.7% on China growth and phosphor upgrades, Healthcare up 7.0% on good surgical+diagnostics trends, and Enterprise down 3.3% (Clickshare up, control rooms down) orders up 3.6% Y/Y, order book at 320.8M down 3% Q/Q. 2H EBITDA of 38.6M up 9.7% Y/Y. Margin Dynamics: BAR grew EBITDA margins 800BPS Y/Y to 8.0% in 2016, despite 2H Entertainment margins falling 400BPS Y/Y to 2.5%. This was primarily due to growth investments, not a mix shift toward laser projection products (these carry margins in-line with non-laser solutions). Management also noted ~ 20M invested in Escape. A clear path to expansion gives it confidence in 2017 guidance. China Cinema: Asia saw the strongest growth in 2016 up 17%, and was an unexpected strong year for BAR's cinema business in China despite China box office sales up only single digits. BAR is still seeing 50%+ capture rate, although China Cinema is expected to moderate in '17. Current China screen count ~40K with final count estimates ranging from K screens Drivers: Cinema: Venues and Hospitality growth expected; EBITDA expansion as Escape investments weighed on '16 margins. Healthcare: management believes investment in healthcare distribution infrastructure will drive growth. Enterprise: Continued Clickshare growth, while management expects Control Room new product launches to stabilize declines. Guidance, Model Changes: Management gave 2017 guidance of mid-single digit sales growth and margin expansion. We raise our 2017E rev/adj. EBITDA from 1,147M/ 87.2M to 1,172M/ 99.7M on efficiency improvement measures, and introduce 2018 estimates of 1,227M/ 109.1M. Andrew Uerkwitz Andrew.Uerkwitz@opco.com Paul Dean Paul.Dean@opco.com Martin Yang, CFA Martin.Yang@opco.com Disseminated: February 10, :08 EST; Produced: February 10, :08 EST Stock Price Performance Company Description Barco is a manufacturer of display technologies. While most known for its cinema projection, Barco also offers display and connectivity products to the enterprise and healthcare markets. For analyst certification and important disclosures, see the Disclosure Appendix. Oppenheimer & Co Inc. 85 Broad Street, New York, NY Tel: Fax:

2 BAR.BR (PERFORM) - NA 5-YEAR PRICE PERFORMANCE INVESTMENT THESIS Source: Bloomberg BAR.BR 2017 Barco is a provider of display and projection hardware and software to the entertainment, enterprise, and healthcare markets. Recent restructuring and divestitures have realigned focus on these core markets. Although Barco has a long history of success in hardware (~80 years), we take a cautious viewpoint as: 1) the global digitalization of cinemas winds down which, paired with what appears to be a declining global cinema market, could potentially lengthen high-end projector replacement cycles, and 2) Barco puts greater emphasis on value-added software and services for its hardware offerings to mitigate hardware commoditization. BASE CASE ASSUMPTION Remaining underpenetrated digital cinema markets continue gradual conversions to levels of matured markets (~96%) Surgical displays continue growth and reach targeted 20% market share Medical display and corporate product refreshes (ex. laser-phospher business projectors) drive replacement cycles CATALYSTS Launch of new tiered pricing ClickShare products 1H17 product launches in V&H and Control Rooms Updates on Healthcare traction in emerging markets UPSIDE SCENARIO Laser diode suppliers reach scale (in next three years), bringing down cost of laser projectors and spurring new wave of cinema conversions Barco's cinema peripherals (Barco Escape, Aura 11.1 immersive sound) gain traction among both cinemas and content producers Barco continues strategic acquisitions to build software/connectivity portfolio as well as gain share in core markets DOWNSIDE SCENARIO Decline of global cinema market shifts Control room LCD display offerings continue to struggle against lowcost LCD alternatives Transition to software-focused control room business is longer/ requires higher investment than expected; business does not return to profitability KEY RISKS Note: Barco's status as an overseas-only listed stock may prevent some investors from owning it. 2 Andrew Uerkwitz:

3 BAR.BR (PERFORM) - NA Barco NV Quarterly Consolidated Statement of Income Statement (in millions except for per share data) FY FY FY 1H16A 2H16A FY 1H17E 2H17E FY FY 2013A 2014A 2015A Jun-16 Dec A Jun-17 Dec E 2018E Total Revenues 1, , , , ,226.7 Cost of Revenue Gross Profit Research & Development Sales & Marketing General & Administrative Other Opex (income) (4.4) (5.3) (3.0) (1.3) (2.0) (3.3) Total Operating Expenses Operating Profit Restructuring & GW impairment (9.4) (3.4) (29.1) - (12.9) (12.9) Interest, net (2.2) (1.1) Other Income (expense), net (0.9) 6.9 Income (Loss) Before Income Taxes (24.4) 32.7 (1.0) Income Tax (Benefit) Expense (4.9) 7.9 (1.5) Net Income Basic EPS Diluted EPS Basic Shares Diluted Shares Dividend D&A EBITDA Capitalized Development 47.7 Adj. EBITDA Source: Company Data, Oppenheimer & Co. Inc. Estimates. 3

4 BAR.BR (PERFORM) - NA Barco NV Margins and Ratios FY FY FY 1H16A 2H16A FY 1H17E 2H17E FY FY 2013A 2014A 2015A Jun-16 Dec A Jun-17 Dec E 2018E Margin Analysis Gross Margin 33% 34% 35.0% 36% 33% 34.4% 37% 36% 36% 36% R&D, % of Sales 8% 11% 15% 13% 13% 13% 13% 13% 13% 13% S&M, % of Sales 14% 15% 16% 14% 13% 13% 13% 13% 13% 13% G&A, % of Sales 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% Other Opex (income), % of Sales 0% -1% 0% 0% 0% 0% 0% 0% 0% 0% Operating Margin 7% 3% 0% 5% 2% 3% 7% 6% 6% 7% Effective Tax Rate 12% 18% 20% 24% 157% 20% 20% 20% 20% 20% Net Income Margin 5% 3% 3% 5% 0% 2% Non-controlling interest, % of NI 4% 14% 34% 27% 933% 57% 30% 30% 30% 30% Net Income attributable to equity holder margin 5% 3% 2% 3% -1% 1% 4% 3% 3% 4% Adjusted EBITDA Margin 0% 7% 7% 9% 7% 8% 9% 8% 9% 9% Sequential Growth Rates Total Revenue 1% 8% 6% 7% Gross Profit 5% -1% 9% 7% Operating Profit -349% -49% 194% -5% Net Income -183% -97% 3389% -5% EPS -153% -139% -391% -6% WA Shares Outstanding 1% 1% 1% 1% Year-on-Year Growth Rates Total Revenue 0% -22% 13% 5% 10% 7% 6% 6% 6% 5% Gross Profit 3% -21% 18% 6% 4% 5% 8% 16% 12% 4% Operating Profit -21% -61% -95% 224% -228% 2053% 51% 178% 95% 13% Net Income -37% -53% -5% -52% -103% -3% 19% 3202% 124% 13% EPS Diluted Shares Balance Sheet Stats (Annualized) Number of Quarters Assets Inventory as % of COGS 27% 31% 25% 28% 22% 23% 28% 22% 23% 23% Account Receivables as a % of Revenues 15% 19% 18% 18% 16% 17% 18% 16% 17% 17% Other Receivables as a % of Revenues 4% 2% 3% 2% 1% 2% 1% Prepaid expenses % SGA 4% 5% 4% 5% 4% 4% 5% 5% 5% 5% Liabilities Accounts Payable / total expenses 37% 40% 37% 37% 38% 38% 37% 37% 37% 37% Accrued Expenses / total expenses Depreciation / PPE 90% 91% 113% 46% 61% 54% 54% 54% 54% 54% Source: Company data, Oppenheimer & Co. Inc. estimates 4

5 BAR.BR (PERFORM) - NA Barco NV Balance Sheet ( millions) FY FY FY 1H16A 2H16A FY 1H17E 2H17E FY FY 2013A 2014A 2015A Jun-16 Dec A Jun-17 Dec E 2018E Assets Cash & Cash Equivalents Accounts Receivable Inventory Other Receivables Prepaid expenses & accrued income Total Current Assets Goodwill Capitalized development cost (24.2) (24.2) (24.2) (48.5) Other intangibles Property and Equipment, net Other tangible assets Investments Deferred tax assets Other non-current assets Total Assets 1, , , , , , , , , ,227.0 Current Liabilities Current portion of LT debt Short-term debt Accounts payable Advances from customers recevied Tax payables Accrued charges and deferred income Provisions Other current liabilities Total Current Liabilities LT Debt, Less Current Portion Deferred tax liabilities Other LT Liabilities Total Liabilities Non-controlling interest Stockholder's Equity Total Liabilities and Equity 1, , , , , , , , , ,227.0 Source: Company Data, Oppenheimer & Co. Inc. Estimates. 5

6 BAR.BR (PERFORM) - NA Barco NV Cash Flow Statement ( millions) FY FY FY 1H16A 2H16A FY 1H17E 2H17E FY FY 2013A 2014A 2015A Jun-16 Dec A Jun-17 Dec E 2018E Operating activities: EBIT after restructuring (27.4) Amortization capitalized development cost Depreciation (tangible & intangible fixed) Gains and losses on tangible fixed assets 0.0 (0.1) (0.5) (0.3) (0.1) (0.4) - - Share options recognized as cost Share of profit/(loss) of joint ventures (1.1) (0.0) Impairment of capitalized development costs and GW Restructuring provision (personnel) (2.9) (7.5) (4.9) Gain on sale of business - (6.7) (1.4) (1.0) - (1.0) Discontinued ops: CF from operating 21.3 (4.4) - - Changes in operating assets and liabilities, Accounts receivable 25.8 (19.7) (5.4) (1.6) (9.9) (2.1) (12.0) (9.4) Inventory 29.3 (11.9) 27.6 (27.2) 24.4 (2.8) (35.3) 29.8 (5.5) (8.0) Accounts payable (29.9) (15.0) 12.3 (2.7) 10.0 (12.0) Other changes in NWC (15.5) Discontinued ops: change in NWC Net operating cash flow (7.8) Interese income, net (2.2) Income taxes (18.9) (4.2) (4.1) (8.0) (3.5) (11.5) Other non-operating results - (3.0) (14.9) 9.3 (9.3) - Discontinued ops: income taxes and interest (0.0) (5.1) - - Net cash provided by operating activities (2.9) Investing activities: Product development expense (62.1) (47.7) Purchase of fixed assets, net (22.6) (17.7) (13.6) (10.9) (3.5) (14.4) (5.0) (5.0) (10.0) (10.0) Acquisition of group companies (net of acquired cash) (51.7) (11.3) (9.8) 0.6 (9.2) Dividend to non-controlling interest - (1.8) (2.6) (5.7) Other investing (3.1) (2.0) (23.1) (10.7) (6.0) (16.7) Discontinued ops: CF from investing (12.9) (0.9) - - Net cash used for investing activities (139.4) (93.4) 89.8 (37.2) (3.1) (40.3) (5.0) (5.0) (10.0) (10.0) Financing activities: Dividends paid (16.9) (18.4) (19.4) (20.8) 0.2 (20.6) (22.8) 0.2 (22.6) (22.6) Capital increase (0.3) (0.0) (0.3) Proceeds from share issuance, net 9.1 (11.3) (1.7) LT liabilities proceeds, (payments) (5.2) (6.2) (11.4) ST liabilities proceeds, (payments) 12.6 (8.3) (18.0) (2.2) (0.0) (2.2) Discontinued ops: CF from financing (0.0) Net cash provided by (used for) financing activities 22.8 (18.375) (29.5) (26.5) (2.4) (28.8) (22.8) 0.2 (22.6) (22.6) Net increase in cash 39.5 (22.103) (66.5) (18.6) Cash: Beginning of year Cash and Equivalents CTA (FX) (5.1) (5.2) 9.5 (1.0) End of period Source: Company Data, Oppenheimer & Co. Inc. Estimates. 6

7 BAR.BR (PERFORM) - NA Disclosure Appendix Oppenheimer & Co. Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Analyst Certification - The author certifies that this research report accurately states his/her personal views about the subject securities, which are reflected in the ratings as well as in the substance of this report. The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Potential Conflicts of Interest: Equity research analysts employed by Oppenheimer & Co. Inc. are compensated from revenues generated by the firm including the Oppenheimer & Co. Inc. Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. Oppenheimer & Co. Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, Oppenheimer & Co. Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers. In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, Oppenheimer & Co. Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest. All price targets displayed in the chart above are for a 12- to- 18-month period. Prior to March 30, 2004, Oppenheimer & Co. Inc. used 6-, 12-, 12- to 18-, and 12- to 24-month price targets and ranges. For more information about target price histories, please write to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager. Oppenheimer & Co. Inc. Rating System as of January 14th, 2008: Outperform(O) - Stock expected to outperform the S&P 500 within the next months. Perform (P) - Stock expected to perform in line with the S&P 500 within the next months. 7

8 BAR.BR (PERFORM) - NA Underperform (U) - Stock expected to underperform the S&P 500 within the next months. Not Rated (NR) - Oppenheimer & Co. Inc. does not maintain coverage of the stock or is restricted from doing so due to a potential conflict of interest. Oppenheimer & Co. Inc. Rating System prior to January 14th, 2008: Buy - anticipates appreciation of 10% or more within the next 12 months, and/or a total return of 10% including dividend payments, and/or the ability of the shares to perform better than the leading stock market averages or stocks within its particular industry sector. Neutral - anticipates that the shares will trade at or near their current price and generally in line with the leading market averages due to a perceived absence of strong dynamics that would cause volatility either to the upside or downside, and/or will perform less well than higher rated companies within its peer group. Our readers should be aware that when a rating change occurs to Neutral from Buy, aggressive trading accounts might decide to liquidate their positions to employ the funds elsewhere. Sell - anticipates that the shares will depreciate 10% or more in price within the next 12 months, due to fundamental weakness perceived in the company or for valuation reasons, or are expected to perform significantly worse than equities within the peer group. Distribution of Ratings/IB Services Firmwide IB Serv/Past 12 Mos. Rating Count Percent Count Percent OUTPERFORM [O] PERFORM [P] UNDERPERFORM [U] Although the investment recommendations within the three-tiered, relative stock rating system utilized by Oppenheimer & Co. Inc. do not correlate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, Oppenheimer & Co. Inc. has assigned buy ratings to securities rated Outperform, hold ratings to securities rated Perform, and sell ratings to securities rated Underperform. Company Specific Disclosures LRD.LN, BAR.BR, POXEL-PA: This research report is intended for use only by institutions to which the subject security or securities may be sold pursuant to an exemption from state securities registration in the state in which the institution is located. Additional Information Available Please log on to or write to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager. Other Disclosures This report is issued and approved for distribution by Oppenheimer & Co. Inc. Oppenheimer & Co. Inc. transacts business on all principal exchanges and is a member of SIPC. This report is provided, for informational purposes only, to institutional and retail investor clients of Oppenheimer & Co. Inc. and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The analyst writing the report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security recommended in this report, the recipient should consider whether such recommendation is appropriate given the recipient's particular investment needs, objectives and financial circumstances. We recommend that investors independently evaluate particular investments and strategies, and encourage investors to seek the advice of a financial advisor. Oppenheimer & Co. Inc. will not treat non-client recipients as its clients solely by virtue of their receiving this report. Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned in this report. The price of the securities mentioned in this report and 8

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